How much does it cost to start an Amazon Private Label Business?

Hi everybody. Welcome to today’s podcast episode, whether it on iTunes or you’re watching on YouTube, I truly appreciate you being here. Today what we’re going to talk about is we’re going to talk about, how much does it really take to get started as an Amazon private label seller? Before we do, a little bit of stuff just to go over.

For those of you who are interested, you may or may not know, that I take people twice a year to the Canton Fair for buying trips. That information if you’d like to join me is available at markscottadams.com/canton-fair, love to have you join me on the trip if you have interest.

Also too, if you can’t make it or looking to do something a little bit closer to home, also doing privatelabellive.com, which our private label live and the link is privatelabellive.com, where it’s our Amazon’s sellers workshop, which we’re going to do here in Florida this fall. And you’ll see I’m putting together all the details now as I record this, so, depending on when you’re listening,

I have everything finalized probably. But all the information will be here below, where we just put a lot of Amazon sellers, smart capable people in a room. Do some teaching, do some coaching, do some training and then let good things come out of putting smart people together. That’s coming up and if you’re interested love to have you in that as well.

But back to the topic at hand, let’s talk a little bit about, how much does it cost? And that’s one of the emails that I get more than anything, is it, it’ll start out with, “Hi Mark. How much does it cost to start? What about inventory? What about all of the other things?” Well, let me just see if we can touch on a couple things.

We’ll go over a couple of different scenarios because I think that is a really good question. Like, all questions, the real answer is, it depends. But let me just tell you how I started out a couple years ago and then tell you what I think is relevant now. My first product, everything total, shipping included, was 250 pieces and it was everything total $400.

I was able to get some reviews and do some things that first month, generate some sales, pay for that and then I think, my gosh, it’s been a while now, but I think I made $700 the second month and then a $1,000 by month three, on that product and then product kind of stayed at about that level.

But for me, that was my amount but in reality, I think that’s probably a little low for most people. I think it really depends on the price of your item and depends on the quantity that you need and then the amount sell through because when you’re calculating inventory, I think you should take into account, the quantity you’re going to sell.

How much you’re going to keep in reserve and then how long it takes you to get restocked and then ultimately, what the minimum quantities are from your supplier. If you’re only selling 200 pieces a month, and the minimum order is a 1,000 pieces, well obviously you’re going to order less than if it were a 1,000 pieces a month and the minimum order of 200.

So, you just have to weigh all those things and calculate those in. I think that’s probably your best determination on what your item is. You’ve heard me say for those of you that who are regular listeners, you’ve heard me say, many, many times, my simple philosophy is try and find a product that maybe makes $1,000 a month.

Learn what you’re doing, go through the learning curve and then you can scale up. Too many people I think, try and start out too big of an item and then they find there’s a little bit more competition then they realize. They’ve got much more of an investment than they realized and then things don’t go as smoothly sometimes as they had hoped.

But I think if you’re going to look at this, I think doing some type of item that’s in the retail of, 12 to $15, somewhere in that range, is a ideal place to start and if you can do that for your item and the cost of your item, gosh you’re looking probably no more than 2 or $3, $4 at the very most, somewhere in that range, including your shipping.

And if you can find the right product and it’s small enough in size and you can get your quantities in that 100 to 300 pieces, I think you’re okay. Because quite frankly, you could start at the bare minimum if everything works out for four, $500.

Now the reality of that is, do I think you should start at that low amount? No. I think it’s okay to put that amount of money into your first product but I think certainly the more you can have the better because out of that first product, you should have some set aside to do some promotions, to able to get some reviews, which means you’re probably going to give that item away at discount. Whether it’s at a penny, a dollar or 20% off, whatever it.

And you’re going to have to do that because still promotions like that are thee best bang for the buck that you can ever do. But the biggest thing, is to take into account how long it takes for you to get restocked. And I think if you can go through those calculations, you’ll be able to come up with something.

But, I’d say a bare minimum now a thousand, 5,000 would be better if you’re aggressive and you want to scale this business up quickly. Maybe it’s 10,000 to start. Who knows what it is but everybody will tell you different numbers and the real answer is there is no set number, it depends on the item you choose more than anything.

However, the worst thing to do is to be able to go to sleep and have not enough money to do something. You put your head on the pillow in that case and you just have worrying and have anxiety and you shouldn’t do that.

If I didn’t have that for four, $500, $1,000 to get started, however you could raise a little bit of money and you can’t tell me you can’t raise that novel amount of money if you really had to. Then I think you should go and have some money in reserve too, because one of the things that can happen, is that things really take off and do well.

You’re constantly having to, you’re making profits with your sales but you’re constantly having to buy more inventory to support the larger sales. A lot of people talk about inventory management, backend things, I guess because they don’t understand but in this case it’s good and bad.

I mean, it’s obviously good to have lots of sales but it’s tough because you’re reinvesting all your profits at that point and you really don’t have money to be able to take out if you need or to start to be able to invest in other products.

But the real answer to the question, how much does it cost to get started? I think ultimately, it depends on the product that you choose and how aggressive you want to be and ultimately what your sales estimates are. But I think low end of, four, $500, like I did, up to a reasonable amount of a $1,000, $1,500, somewhere in that range and I think that probably would cover, 60, 70% of people maybe.

And then the remaining parts, three to $5,000 and then that upper two, three, four, five percent, maybe $10,000.

So, with that said that’s just some rough numbers and things and ultimately as a business owner, it’s your responsibility to go through the numbers and see how everything works and set things aside and ultimately make sure you’ve got enough cash to keep your business going, because that’s one of the things that truly is important is not only find the product in this, but being able to manage your product after you, you have to then grow out, after you have it listed on Amazon.

So, hope that little bit of information helps and I look forward to seeing you next time. Thanks.